The pandemic accelerated the adoption of contactless payments, which have now become a cornerstone of the modern payment landscape. Initially developed over a decade ago, contactless payment methods, including cards and digital wallets, gained significant traction during the health crisis. Two industry leaders, Visa and Bank of America, are at the forefront of this transformation, discussing the technology’s evolution and its future prospects.
Contactless payments saw early initiatives around 2008, but it was the launch of Apple (NASDAQ:AAPL) Pay in 2014 that marked a significant breakthrough. Despite some initial reluctance, the pandemic catalyzed widespread adoption. Cities such as New York have become pivotal in driving this change, with over 30 U.S. cities achieving more than 60% penetration. In comparison to previous years, the usage and acceptance of contactless payments have grown exponentially, demonstrating a robust shift in consumer behavior.
Increased Adoption Through Public Transit
Public transit systems have played a vital role in promoting contactless payments. Chris Baker from Visa highlighted that New York City’s MTA system sees 75% of face-to-face transactions conducted via contactless methods. This early adoption in high-traffic areas has familiarized consumers with the technology, encouraging its use in daily transactions beyond public transit systems.
Sara Walsh of Bank of America emphasized that the pandemic significantly boosted contactless usage, although some banks had already started enabling contactless cards. The emphasis on public health during the pandemic made contactless payments not just a convenience but a necessity, which led to their widespread adoption.
Advancements in Fraud Prevention
Fraud prevention measures have advanced alongside the rise in contactless payments. Tokenization, which secures transactions by replacing card details with unique tokens, offers enhanced security and added benefits such as increased conversion rates. EMV chip technology, combined with NFC for contactless transactions, has substantially reduced card-present fraud and minimized card skimming risks.
Baker notes that EMV chips and NFC create a robust defense against fraud. By eliminating physical contact between the card and the terminal, the opportunity for fraudsters to use skimming devices is greatly diminished, contributing to higher security levels in contactless payments.
Future developments in contactless payments include the integration of biometrics, merging card-based and mobile wallet-based transactions. Walsh envisions a rise in biometric payments, such as using one’s palm for transactions. Baker predicts a “tap to everything” future, where NFC technology becomes ubiquitous in various use cases, making contactless payments an integral part of everyday life.
As the U.S. continues to increase its contactless payment adoption rate, reaching 50% penetration in June, both Visa and Bank of America see significant growth potential. The ongoing innovations and technological advancements in this area suggest that contactless payments will continue to expand, offering consumers more secure and convenient payment options.
